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The know your customer or know your client (KYC) guidelines and regulations for financial services require that professionals try to verify the identity, suitability, and risks involved with maintaining a business relationship.
Legal affairs
National regulatory framework regarding AML and effective date of the regulations
National regulatory framework regarding Anti-money Laundering (AML) in China mainly consists of AML law, AML guidelines for banks and AML Measures for financial institutions. Chinese governments have started to put more stress on AML supervision by issuing more specific and detailed rules since 2021. AML supervision would be conducted through the whole process of finance business.
AML law of the PRC was first effective on 1 January 2007. The State Council anti-money laundering administrative authority is responsible for nationwide anti-money laundering supervision and administration.
PBOC and State Administration of Foreign Exchange issued the Guidelines for Anti-Money Laundering and Counter-terrorism Financing in Cross-border Services of Banks (for Trial Implementation) on 19 January 2021 (Guidelines). It is aimed to govern the cross-border receipt and payment activities in RMB and foreign currencies and domestic foreign exchange business activities of domestic and foreign institutions and individuals.
The PBC issued Measures for the Supervision and Administration of Anti-money Laundering and Counter-terrorism Financing of Financial Institutions on 15 April 2021 (Measures). It applies to every kind of financial institutions in order to establish and improve their internal control system for AML.
The PBC issued a notice on Strengthening Anti-money Laundering Supervision of Designated Non-financial Institutions in 2018, to specify the anti-money laundering obligations of certain non-financial institutions.
National regulator or relevant authority for AML controls
The State Council anti-money laundering administrative authority is responsible for nationwide anti-money laundering supervision and administration. It establishes an anti-money laundering information centre responsible for receiving and analysing reports on transactions with large amounts and suspicious transactions, reporting the analysis results to the State Council anti-money laundering administrative authority. The relevant departments and agencies of the State Council shall carry out anti-money laundering supervision and administration within their respective scope of duties. Meanwhile, PBC and its branches supervise and administer the anti-money laundering and counter-terrorism financing of financial institutions.
Customer Due Diligence
Conduct of a typical KYC identification process
Financial institutions shall establish a system of determining customer identity pursuant to the provisions of AML law. Guidelines have given requirements for banks with high standards on customer due diligence, including the overall principles, information, circumstances of being not approved and continuous identification obligations and measures have stipulated the requirements for financial institutions.
The overall principle of KYC is to ensure that the customers are qualified to engage in relevant businesses by presenting integrity and accuracy of their identity information. When a financial institution establishes a business relationship with a customer or provides one-off financial services such as cash remittance, currency exchange, bill discounting etc., the financial institution shall conduct verification and registration by requiring the customer to provide true and valid identification documents or any other form of identification document.
For cross-border transaction, banks s